Are you planning to start a business or know someone whose business model has huge potential but is not operating in the right way? Are you worried about logistics and scared to take a leap of faith? Well, if you also feel lost or have multiple questions related to business planning, then stick till the end as we will take you through the journey on how to manage customer demand in your business by understanding the dynamics of the market with special emphasis on demand planning.
Do you know what exactly is demand planning and how it would help a business succeed in the market? To start with, demand planning can be explained as a cross-functional process that takes into consideration multiple elements and helps businesses better understand their customer base/demand for the products or services offered, by avoiding excessive stock or inventory and avoiding disruptions in the supply chain.
In this process, an equilibrium is tried to attain by the business operators where they evaluate optimum demand to eradicate a surplus of inventory that helps in providing customer satisfaction, which ultimately leads to profitable earnings. A point that you must remember is that demand planning and demand forecasting are not synonyms of each other. Moreover, the latter is a part of the former that creates a foundation for customer analysis and demand prediction. Demand planning is a complex process. Thus, to have better knowledge, one can follow the given points:
- Data should be collected from both external & internal sources on the factors known to influence or predict demand.
- Statistical analysis of sales, inventory, and other important data sets.
- Modeling the data or performing appropriate analysis to predict future demand.
- The next step is to collaborate with suppliers, manufacturers, salespeople, and other stakeholders to collect potential information that could affect demand like promotions, schemes, and production delays.
The above-given steps lead to the formation of the following:
- Demand forecast that creates a prediction of demand based on the data model and analysis, which is then followed by
- Demand plan that sketches out the approximate amount, type, and location of inventory needed to fulfill the forecasted demand in the market.
Apart from the above stated basic functions, some demand planning strategies take into consideration the following processes, at least in part:
- In order to analyze factors that affect the market demand for different products, PLM, which is Product Lifecycle Management, is studied.
- Some businesses also do replenishment planning to ensure that stock is in the right locations in quantities to meet projected demand.
With the advancement in technology, it has become easier for businesses to have more accurate and real-time data, which helps demand planning. In any business, this process plays an important role and must be continuously practiced in order to survive and flourish in the long run. To have a more accurate understanding of the process, you can read an insightful article at reputable places like TechTarget. It thoroughly explains 7 salient steps involved in the process of successful demand planning.
Lastly, for any process to implement and succeed, a company requires skilled human resources and to practice, demand planning, people should be equipped with the knowledge of data analysis, scientific tools, and, most importantly, great communication skills. To maximize profitability, the supply chain in any business should be as efficient as possible. Accurate demand planning is critical in ensuring supply chains are efficient for inventory and ultimately, revenue. However, there are also numerous factors that affect the demand, including labor force changes, economic shifts, changes in consumers’ tastes and preferences, natural disasters, or global crises like Covid 19. To get more information, you can read more by reputable sources.